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The Land Investor

News and Commentary on Land-based Investment

Absentee Landowners Hit: An IRS Effort Imposes a 15.3% Self-Employment Tax

John Watson, Fay Ranches.  Conservation Reserve Program (CRP) payments have generally been recognized by absentee/non farmer landowners as passive income.  Per a tax court ruling last week, the IRS position is now to recognize CRP income as active; Therefore subject to a 15.3% self-employment tax.

The Conservation Reserve Program (CRP) is a cost-share and rental payment program under the United States Department of Agriculture (USDA), and is administered by the USDA Farm Service Agency (FSA).

Roger McEowen, director of the Center forAgricultural Law at Iowa State University, added; “Effectively, IRS now is arguing that any time you enter into an activity with a profit intent, it will be subject to a 15.3% self-employment tax. It’s important not just to farmers to knock down this precedent, but for any investor, whether it be a cash rent landowner or someone who invests in stocks.”

“The Tax Court’s decision is the first court opinion holding that a non-farmer’s CRP income is subject to self- employment tax simply by virtue of signing a CRP contract,” McEowen said. “As a result of the Tax Court’s decision in Morehouse, it is hard to imagine any situation where CRP rental income will not be subject to self-employment tax.”



This entry was posted in Agriculture, Farmland, Fay Ranches, Legacy Landbank, Soil, U.S. Farmland. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

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